Tuesday, April 7, 2015

CPCE Put/Call Ratio Daily Chart Signaling Near-Term Market Top

Keystone pointed out the bottom in stocks with the high print in the CPCE the second week of March, which occurred. The worry had grown to levels where prior stock market bottoms had occurred (green circles). The SPX ran higher from 2040 to 2120, about 80 handles. In general, 2015 is sideways choppy action chewing up bulls and bears alike spitting out the bears one day and the bulls the next. The SPX is in the 2000-2120 range for the first three months of the year.

The CPCE collapses to 0.50 as traders drink left over wine from the Easter holidays, already drunk as skunks buying any stock with a heartbeat. The euphoria and joyous mood is cascading around the world with a large US stock rally yesterday and happiness in Asia and Europe overnight. The CPCE is at the same level that identified the top in markets late December and selloff that began the year. From late December to early January, the SPX fell from 2095 to 2000, about 95 handles in only five short days.

The CPCE signals rampant complacency in the stock market with everyone, even the cab driver and neighbor Nancy Jones, the housewife that is now trading each day from a laptop on the kitchen table, proclaiming that stocks will continue higher due to the global central banker easy money. These folks and the majority of market participants have no worry and do not see any reason to buy protection (puts) since stocks only go up and never go down anymore. What a Utopian world the central bankers have created. Kneel and worship at their feet!

Due to the low put/call, you do not want to be going long right now, instead, lighten up on longs, exit any position that you were thinking of selling, and if a short-seller, you can feel comfortable bringing on more shorts going forward in the near term. The stock market should top out any day moving forward and the SPX should drop from 40 to 90 handles. US futures are catching a bid ahead of the opening bell which is perfect to exit some longs and enter some shorts. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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